Property Law

Torrens Title – Indefeasibility of Title, Caveats, Fraud, Registration and Priorities – Real Property Act 1900 (NSW) 2 QUESTION Fred owns land in" rel="nofollow">in NSW. His solicitor Joe, takes the certificate of title and stated he was actin" rel="nofollow">ing as agent for Fred and sells to Henry at a large discount. Henry did NOT know of the fraud of Joe but was suspicious but did not make any further enquiries. At settlement Henry received the certificate of title for the land and a transfer, which had Fred’s forged signature. Henry then sold the land to Carol. Carol did a search of the title and found that there were no caveats on the land. At settlement, Carol received the certificate of title and the forged transfer. from Wendy to Jackie. Mary had the dealin" rel="nofollow">ing stamped and then drove to the office of Land and Property Information (LPI) in" rel="nofollow">in order to lodge the documents Discuss the applicable law relatin" rel="nofollow">ing to Torrens Title – Indefeasibility of Title, Caveats, Fraud, Registration and Priorities with regard to the Real Property Act 1900 (NSW) Referencin" rel="nofollow">ing style must comply with: Australian Guide to Legal Citation. 3 BACKGROUND INFORMATION – please do not just copy in" rel="nofollow">into the paper Torrens title is that a member of the general community, actin" rel="nofollow">ing in" rel="nofollow">in good faith, can rely on the in" rel="nofollow">information on the land register as to the rights and in" rel="nofollow">interests of parties recorded there, and act on the basis of that in" rel="nofollow">information. A prospective purchaser, for example, is not required to look beyond that record. The legislation governin" rel="nofollow">ing Torrens Title in" rel="nofollow">in New South Wales is the Real Property Act 1900 The main" rel="nofollow">in object of the system is to make the register conclusive (in" rel="nofollow">in most cases) without a transferee or purchaser havin" rel="nofollow">ing to look behin" rel="nofollow">ind the register as was the case in" rel="nofollow">in the "old system title" system in" rel="nofollow">inherited from age-old English legal practice and procedure. Once your name is registered or recorded on the title register under Torrens title you become the owner of the property to the exclusion of all others, by the very fact of registration. You therefore obtain" rel="nofollow">in "title by registration", which is the pivotal concept of Torrens Title. The registered proprietor of Torrens land is said to have an in" rel="nofollow">indefeasible title. That means that only in" rel="nofollow">in very limited circumstances can his or her title be challenged. Normally, the person who is recorded as the owner of a parcel of land cannot have his title challenged or overturned. This concept is known as "in" rel="nofollow">indefeasibility" of title. There are, however, exceptions to this general rule. The main" rel="nofollow">in ones bein" rel="nofollow">ing: • if a dealin" rel="nofollow">ing is registered fraudulently In New South Wales is that a purchaser who acquires land through a forged or fraudulent in" rel="nofollow">instrument, but is not a party to the fraud, will receive an in" rel="nofollow">indefeasible title on registration of the forged or fraudulent in" rel="nofollow">instrument, and the former owner will not be entitled to have the title restored or to monetary compensation from the new owner/purchaser. Indefeasibility of title applies to the registered proprietor or join" rel="nofollow">int proprietors of land. • s 42 (known as the 'key in" rel="nofollow">indefeasibility provision') - the proprietor listed on the register holds the land free of any in" rel="nofollow">interests which are not listed on the register (there are exceptions). o Doesn't apply in" rel="nofollow">in the case of fraud. • s 43 (known as the 'notice provision') - once a person completes a transfer from the real proprietor, he is free from any trust or unregistered in" rel="nofollow">interests, even if he had notice of that in" rel="nofollow">interest (there are exceptions). o Doesn't apply in" rel="nofollow">in the case of fraud. o Note: this is essentially the overrulin" rel="nofollow">ing of the usual priority doctrin" rel="nofollow">ine for earlier equitable in" rel="nofollow">interests vs. later legal in" rel="nofollow">interests. There is also a less important s 43A, which deals with situation where there is a competition between a person holdin" rel="nofollow">ing an earlier equitable in" rel="nofollow">interest, and a person who has obtain" rel="nofollow">ined a later equitable in" rel="nofollow">interest through a dealin" rel="nofollow">ing with the registered proprietor (ie, whose in" rel="nofollow">interest is registrable, but has not yet been registered). For the purposes of such a scenario, the equitable in" rel="nofollow">interest of the person dealin" rel="nofollow">ing with the registered proprietor is treated as a legal in" rel="nofollow">interest These doctrin" rel="nofollow">ines are concerned with a situation where a person (the 'forger') forges the signature of the real proprietor on a transfer and sells the property to an in" rel="nofollow">innocent purchaser. Both the real proprietor and the purchaser are in" rel="nofollow">innocent, and both want the property. There are two (opposin" rel="nofollow">ing) approaches to such a situation: • Immediate in" rel="nofollow">indefeasibility - the purchaser obtain" rel="nofollow">ins in" rel="nofollow">indefeasible title once he registers the transfer regardless of the fact that the document was in" rel="nofollow">invalid. He becomes immediately in" rel="nofollow">indefeasible. • Deferred in" rel="nofollow">indefeasibility - the purchaser's title is defeasible and can be 'set aside' if the real proprietor makes a claim. However, if the purchaser transfers his title to a new purchaser (bona fide and for valuable consideration) before any such claim is made, that new purchaser's title does become in" rel="nofollow">indefeasible. Thus, the in" rel="nofollow">indefeasibility is deferred until a new bona fide purchaser arrives In Frazer v Walker (from NZ), the court held that the doctrin" rel="nofollow">ine of immediate in" rel="nofollow">indefeasibility prevails. This was then confirmed by NSW legislation in" rel="nofollow">in s 45 of the Real Property Act 1900 (NSW). • This means that a purchaser registered through fraud, error, or by means of a void in" rel="nofollow">instrument nevertheless grants the purchaser in" rel="nofollow">indefeasible title immediately (as long as the purchaser didn't cause the fraud). These issues, and what happens in" rel="nofollow">in the case where the first purchaser uses fraud, are discussed in" rel="nofollow">in Breskvar v Wall: • Registration creates title even if the situation is within" rel="nofollow">in the exceptions listed in" rel="nofollow">in the act (such as fraud). The difference is that the title is subject to the rights on the defrauded vendor (ie, the title is defeasible). • The fraud creates an equitable in" rel="nofollow">interest on the part of the defrauded vendor, which is not barred by the legislation because there is an exception made for fraud. The vendor can thus cancel the registration of the purchaser. • However, once the purchaser transfers his title to a third party (bona fide and good consideration), it becomes a question of priorities. o If the third party completes registration entirely, than he obtain" rel="nofollow">ins in" rel="nofollow">indefeasible title. o If the third party doesn't complete registration before the origin" rel="nofollow">inal vendor brin" rel="nofollow">ing a claim, the vendor's earlier equitable in" rel="nofollow">interest would prevail over the third party's later equitable in" rel="nofollow">interest unless the vendor's conduct helped encourage the third party's false assumption (that the title vested with the fraudulent purchaser). Note that Breskvar was decided before the in" rel="nofollow">introduction of s 43A, which would now settle the dispute. The leadin" rel="nofollow">ing judicial statement as to what constitutes fraud within" rel="nofollow">in the Torrens title legislation, is the followin" rel="nofollow">ing extract from Assets Company Ltd v Mere Roihi (1905) AC 176, at p210: Fraud” requires actual fraud, and actual personal dishonesty or moral turpitude by the registered proprietor, for example National Commercial Bankin" rel="nofollow">ing Corporation of Australia Limited v Hedley (1984) NSW ConvR 55-211 For there to be fraud, there must be knowledge either that someone would be deprived of an in" rel="nofollow">interest, or that the Registrar General would be misled (for example Australian Guarantee Corporation v De Jager [1984] VR 483 In Wiamiha Sawmillin" rel="nofollow">ing Co Ltd v Waiore Timber Co Ltd (1923) NZLR1,137, at page 1,173 and 1,175, the Court said: “The true test of fraud is not whether the purchaser actually knew for a certain" rel="nofollow">inty of the existence of the adverse right, but whether he knew enough to make it his duty as an honest man to hold his hand…” 4 CASES Frazer v Walker (1967) 1 AC 569 Breskvar v Wall (1971) 126 CLR 376 Gibbs v Messer Assets Company Ltd v Mere Roihi (1905) AC 176 Wiamiha Sawmillin" rel="nofollow">ing Co Ltd v Waiore Timber Co Ltd (1923) NZLR1,137 National Commercial Bankin" rel="nofollow">ing Corporation of Australia Limited v Hedley (1984) NSW ConvR 55-211 Australian Guarantee Corporation v De Jager [1984] VR 483